Question 1

To calculate GDP using the expenditure approach, in part it is necessary to add exports and subtract imports.

Accepted Answer

The expenditure approach to calculating GDP includes four components: consumption, investment, government spending, and net exports (exports minus imports). Therefore, to calculate GDP using the expenditure approach, it is necessary to add exports and subtract imports.

Question 2

What is ʺunderground productionʺ? Is it included in GDP?

Accepted Answer

The answer of What is ʺunderground productionʺ? Is it included...

Question 3

Net investment equals gross investment minus depreciation.

Accepted Answer

This is true, net investment is calculated by subtracting depreciation (the decrease in value of an asset due to wear and tear) from gross investment (the total amount spent on new capital expenditures).

Question 4

List and discuss various types of goods and services omitted from measured GDP.

Accepted Answer

The answer of List and discuss various types of goods...

Question 5

Explain how underground economic activity affects measurement of GDP.

Accepted Answer

The answer of Explain how underground economic activity affects measurement...

Question 6

While studying with your friend, your friend states, ʺOur leisure time increases GDP but lowers our economic welfare because it reduces the amount of goods and services we can consume.ʺ Is your friendʹs statement correct?

Accepted Answer

The answer of While studying with your friend, your friend...

Question 7

Using a graph, draw and label the phases and turning points of the business cycle.

Accepted Answer

The answer of Using a graph, draw and label the...

Question 8

What would happen to measured GDP if more people started hiring workers to do house chores such as cooking and cleaning?

Accepted Answer

The answer of What would happen to measured GDP if...

Question 9

When gross investment is greater than depreciation, then the nationʹs capital stock increased.

Accepted Answer

When gross investment is greater than depreciation, it means new capital is being added to the economy, which leads to an increase in the nation's capital stock.

Question 10

When IBM, an American firm, produces computer chips in another country, this production is not included in U.S. GDP because the production did not take place in the United States.

Accepted Answer

GDP only includes economic activities that take place within a country's borders. Therefore, production by a domestic firm in another country is not included in that country's GDP.

Question 11

$$\begin{array} { | l | l | } 
\hline \text { Item } & \begin{array} { l } 
\text { Billions of } \
\text { dollars }
\end{array} \
\hline \text { Consumption expenditure } & 6,258 \
\hline \text { Investment } & 1,623 \\hline \begin{array}{l}
\text { Government expenditure on } \
\text { goods and services }
\end{array} & 1,630 \\hline \text { Exports of goods and services } & 998 \
\hline \text { Imports of goods and services } & 1,252 \
\hline
\end{array}$$
-The table above gives the values of different expenditures in the United States during 1999. Answer the following questions about the United States.
a) What was the value of net exports of goods and services in 1999?
b) What was nominal) GDP equal to in 1999?
c) What was the nominal) value of total production equal to in 1999?

Accepted Answer

The answer of \[\begin{array} { | l | l |...

Question 12

If depreciation exceeds gross investment, net investment is negative.

Accepted Answer

This is because net investment is gross investment minus depreciation, so if depreciation exceeds gross investment, the result will be a negative number.

Question 13

If you buy a new water skis and other new equipment for $2,500 and take a week off of your job, where you earn $1,000 a week, to go water skiing. The equipment you purchased was all produced in the United States. You think that the week was worth $4,000. As a result of your vacation, GDP changes by how much?

Accepted Answer

The answer of If you buy a new water skis...

Question 14

The circular flow diagram shows only the aggregate expenditures measure of GDP.

Accepted Answer

The circular flow diagram shows both the aggregate expenditures measure and the factor income measure of GDP. It illustrates the relationship between households, firms, and the government in terms of their consumption, production, and income generation.

Question 15

The circular flow diagram shows that the flow of payments to the factors used to produce goods and services exceeds the flow of payments for final goods and services.

Accepted Answer

The circular flow diagram shows that the flow of payments for final goods and services exceeds the flow of payments to the factors used to produce them. This is because the value added at each stage of production is included in the final price of the product when it is sold to consumers.

Question 16

On January 1, 2010, United Delivery had trucks valued at $1.3 million. During 2010, United Delivery purchased new trucks valued at $500,000. If the value of the trucks on December 31, 2010 was $1.5 million, what is the amount of its net investment and its depreciation during 2010?

Accepted Answer

The answer of On January 1, 2010, United Delivery had...

Question 17

Intermediate goods and services are one of the largest components of the expenditure approach to measuring GDP.

Accepted Answer

Intermediate goods and services are not counted in GDP when using the expenditure approach, as GDP measures the market value of final goods and services produced in a country during a given period to avoid double counting.

Question 18

The expenditure approach to measuring GDP includes firmsʹ spending on wages.

Accepted Answer

The answer of The expenditure approach to measuring GDP includes...

Question 19

The circular flow shows that aggregate spending is larger than aggregate income because people save.

Accepted Answer

The circular flow shows that aggregate spending equals aggregate income in equilibrium. Aggregate saving is a component of income that is not immediately spent and is not included in aggregate spending. Therefore, aggregate spending is not larger than aggregate income solely because of saving.

Question 20

Assume a small nation has the following statistics: its consumption expenditure is $15 million, investment is $2 million, government purchases of goods and services is $1 million, exports of goods and services to foreigners is $1 million, and imports of goods and services from foreigners is $1.5 million. Calculate this nationʹs GDP.

Accepted Answer

The answer of Assume a small nation has the following...

Quiz 4: Measuring Gdp and Economic Growth